POSTAGE stamps, as collectibles and investments, are a class of passion assets that has stood the test of time. In today’s manic-depressive financial markets, they can act as a safe haven investment.

When global market events occur, such as the fallout from the recent Brexit referendum, passion assets such as investment-grade stamps can provide investors with portfolio diversification as well as the opportunity for capital growth over time, according to collectibles dealer Stanley Gibbons Group plc.

“With the uncertainty caused by the Brexit vote — financial markets hate uncertainty more than anything — and its aftermath, perceived safe haven assets such as gold or rare stamps and coins can act as a strong diversifier and portfolio anchor,” says Stanley Gibbons managing director Keith Heddle in an email response to Personal Wealth.

“Rare stamps and coins are not for income investors, due to their uncorrelated nature, extremely low volatility, tangibility and historical performance — no guarantee for the future, of course. As a ‘by-product’, many investors like the fact that they are owning little pieces of history whose values tend to be supply-demand driven, rather than holding a financial construct or a virtual unit,” he adds.

Returns from stamp investments have held steady in volatile stock markets. Stanley Gibbons’ index of the 250 most valuable British stamps saw a return of 1.2% in the 12 months ended June, beating the FTSE 100, which lost 11% during the period. A separate list of the 30 rarest stamps returned 0.5% over the past year. The indices are benchmarks to show historic price movements.

Historically, rare stamps have stood out against other passion assets such as vintage wine, fine art, precious coins and even classic guitars and violins. Over the years, rare stamps have shown their investment and wealth preservation pedigree when global stock markets have struggled, according to Stanley Gibbons.

The collectibles dealer runs a marketplace to buy, sell and invest in collectable postage stamps and coins. It is listed on the Alternative Investment Market of the London Stock Exchange. The 160-year-old philatelic company also allows individuals to buy a single portfolio of stamps and offers various capital-protected investment plans.

For the portfolios, customers have three investment options — the flexible trading portfolio, the fixed-term collectibles plan and the premium portfolio builder (PPB) — to cater for different investment strategies. The minimum investment, offered under the PPB, requires customers to deposit at least £10,000 (RM52,818) for between 5 and 10 years. 

This gives them a portfolio of five to seven rare stamps, which can be kept at home or stored and insured at Stanley Gibbons’ London office at no extra charge. At the end of the term, if the stamps have not risen in value, when compared with the prices listed in its own catalogue, the company will refund the investors’ money. When the collector wants to sell the portfolio, the company takes 20% of the percentage increase in value.

In a recent development, the collectibles dealer made both its chief executive and chief financial officer redundant as it is considering relocating its offshore business in Jersey back to London, where the bulk of its business is. 

According to The Telegraph, Stanley Gibbons has been underperforming since 2014, largely due to a lack of demand from China, which is seeing a slowdown in economic growth. In January, it was reported that the company still had collectibles worth about £55 million, comprising mainly stamps. Its shares have plunged from £287.20 in March 2014 to £15.125 on Aug 3.

Heddle says the investment value of the assets the company deals in “are almost completely unaffected” by the gyrations in the financial and stock markets. “Even when the stock is our own! As you know, stock market pricing is largely speculative.”

He adds that repositioning its executive management is “a good move” as it will allow the company to focus on its core business. 

Increase in demand from emerging markets
 

Stamp collecting has seen renewed interest in the emerging markets. According to data provided by Universal Postal Union, a UN agency that coordinates postal policies among member nations, there were 60 million stamp collectors worldwide as far back as 2006. And a third of them were in China, where 17% of wealthy investors hold alternative investments such as stamps, coins, wine, art and jewellery. 

According to Intelligent Partnership’s 2015 Alternative Investment Report, the global philately market is worth US$3 billion a year. 

The increase in demand is also fuelled by a growing class of sophisticated investors seeking to broaden and bolster their portfolios, says Heddle. “Entrepreneurs who have built their businesses by pushing the envelope are now investing in what is on the envelope. I have actually heard stamp investing described as cool and even sexy. Other factors include a growing, global, affluent middle class — digitally driven but seeking sophistication, permanence and a connection with history — and the Indian and Chinese markets,” he adds.

The nouveau riche in China have been accumulating alternative assets as a way of reclaiming their heritage. Mao Zedong, the founding father of the People’s Republic of China, had banned stamp and coin collecting as they were “bourgeois”. 

“So, many Chinese, with their new wealth and new freedoms, are reclaiming their heritage. We have seen this in the art and antique markets. But they are also buying things like the Penny Black, Penny Red and Two Penny Blue — the world’s very first stamps,” says Heddle.

One of the greatest vagaries in stamp collecting and investing over the past six decades has been the skyrocketing prices some stamps have commanded at auctions. In 2013, the British Guiana One-Cent Black-on-Magenta from 1856 — regarded as “the rarest stamp in the world” — set the record for the most expensive stamp ever sold, going for more than US$9.5 million at a Sotheby’s auction. Last month, the Inverted Jenny — a 1918, 24-cent US stamp that features an airplane mistakenly printed upside down — was auctioned for US$1.175 million (RM4.7 million).

Investing in stamps involves buying collector-quality issues, holding them for a period of time, then seeing if one can sell them for a profit. Like any other alternative investments, demand fluctuates and moves in cycles around the big shows, particularly the international show that is held once every decade in the UK, says Heddle. 

The next show will be held in 2020 and Stanley Gibbons anticipates an increase in demand for rare stamps as collectors start building their collections to exhibit. This represents a “buying opportunity” for British stamps now. 

The most expensive stamp the collectibles dealer has sold this year is a rare Plate 77 Penny Red, catalogued at £500,000. According to The Guardian, the stamp, which dates back to 1863, is viewed by collectors and investors as the holy grail of philately because it was not meant to exist. The stamps were printed but never sold by post offices as their quality was not good enough.

Southeast Asian rarities are also highly sought after, particularly those that date back to the late 18th and early 19th centuries, says Heddle. The $500 (Straits dollar) Malaya Straits Settlements stamp is one of the rarest from the King George V period and is considered the star of Malayan philately. In 2006, the stamp was catalogued at £60,000. It is currently worth £100,000.

Another renowned Malayan stamp is the 1880, 30-cent Straits Settlements Claret, which has a “10” printed on it but without the word “cents”. The horizontal pair, with two overprint varieties, now fetches £20,000 if they are unused and have their original gum. 

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